What Are Employer Mandate Penalties?
The employer mandate requires that Applicable Large Employers meet the established requirements for Minimum Essential Coverage, Affordability, and Minimum Value Coverage. Each of those requirements has its own penalty.
Penalties are triggered when a company fails to comply with a requirement, and at least one of its full time employees receives a tax credit to purchase insurance on the individual marketplace. In addition, there are also penalties related to a company’s failure to submit the proper IRS filings.
Form-related failures (e.g., incorrect information, failure to submit filings, etc.) will result in penalties up to $280 per return. The IRS can assess this penalty twice for each full-time employee -- once if the statement is not provided to the employee, and another time if the statement is not filed with the IRS. Also, increased penalties apply if the employer intentionally disregards the filing requirement. Learn more.
Zenefits is unable to advise on individual penalty estimates, please reach out to a tax advisor with these inquiries.
Penalties are applied on a monthly basis, and calculated as follows:
- Minimum Essential Coverage (MEC) Penalty: $2750 (2022) per year multiplied by the number of full-time employees at the company (minus the first 30 employees). It was $2700 in 2021.
- Penalties are calculated on a monthly basis.
- Affordable Minimum Value Coverage (AMVC) Penalty: $4120 (2022) per year for every full-time employee who purchased insurance on the individual marketplace for that month. It was $4060 in 2021.
- Penalties are calculated on a monthly basis.
- This penalty will only be applied in instances where the Minimum Essential Coverage penalty is not applied. If a company fails to comply with Minimum Essential Coverage requirements and triggers the Minimum Essential Coverage penalty, the Affordable Minimum Value Coverage penalty will not be applied.
- If a company complies with the Minimum Essential Coverage requirements and does not trigger the Minimum Essential Coverage penalty, then it’s still possible that they could trigger the Affordable Minimum Value Coverage penalty.
- The Affordable Minimum Value Coverage penalty cannot exceed the maximum possible Minimum Essential Coverage penalty.
Click here to view example ACA Penalty calculations.